FIT THE STRATEGY TO THE SERVICE TYPE (OR DON'T)

Generalizations about services are inevitably oversimplifications. Differences among services are perhaps as great as those differentiating services from manufacturing activities. The sector is so diverse that it defies concise description. How, for example, can we compare the work of a hair stylist (highly personal, performed face-to-face, difficult for the customer to assess in advance, reliant on a high degree of trust and a certain amount of input from the customer) with a television network (simultaneous broadcast to viewers with many alternatives)? Rather than compare services one to one, we might think of them as falling along a spectrum with several important dimensions.

Scholars who have studied this challenge have come up with several generic types of service, each with different kinds of service encounters and needs. David Maister, Christopher Lovelock, and Roger Schmenner have provided what have proved to be the most useful ideas for "mapping" the service sector for our purposes. They base their service typology on the degree of service customization, the amount of customer contact required, and labor intensity—the importance of labor costs in creating the service. Combining their ideas allows us to regard all services as factory (think low customization, low customer contact, and low labor intensity, as in fast food), mass (low customization and customer contact but high labor intensity, as in package delivery services), technological (high levels of customer contact and customization with low labor intensity, as in online banking), and professional (high customization, customer contact, and labor intensity, as in legal services). A "map" of these basic types of services prepared by Maister and Lovelock is shown in figure 1-5.

As shown in figure 1-5, each service type has its own particular goals and human resource challenges when it comes to recruiting, selecting, training, assigning, and rewarding people.

Figure 1-5 Important Human Resource Management Challenges in Various Service Enterprises

Source: Adapted from a framework first presented in David H. Maister and Christopher H. Lovelock, "Managing Facilitator Services," Sloan Management Review, Summer 1982, p. 22, as shown in James L. Heskett, W. Earl Sasser Jr., and Christopher W. L. Hart, Service Breakthroughs: Changing the Rules of the Game (New York: The Free Press, 1990), at p. 214.

Color outside the Lines

We've just delineated distinct types of services, which require different organization, staffing, training, rewards, uses of technology, and cost profiles, among other things. Conventional wisdom suggests that strategies that fit within these boundaries are the most successful. However, the opposite argument can be made, that there are real opportunities for service strategies that cross conventional boundaries on these maps. For example, organizations like LegalZoom.com have distinguished themselves from the competition by transforming a professional service into a technological service that makes low-cost legal documents and services for standard problems available online. L.L. Bean succeeded in catalog retailing by crossing the boundary from a factory service to what some would argue is a professional service with its service-center employees capable of providing advice about appropriate sporting goods to customers who shop by telephone or online. Using a kindergarten analogy, these are strategies crafted by leaders who "color outside the lines." Instead, they look for ways to bend the conventional boundaries of their service enterprises.

Address Different Management Challenges

One study of the management challenges faced in various types of companies in the service sector concluded that managers in service enterprises share certain challenges, such as maintaining quality (the number one concern), hiring, and training. But the study also found some wide differences in the challenges faced by managers among various kinds of service businesses.

For example, for mass services that had high need for customization and contact with customers but low labor input, technology advances represented the most important management challenge. This would be typical, for example, for many Internet-based retailing enterprises. In contrast, for professional services (with high need for customization, customer contact, and labor input), "making service warm" was an especially important challenge.